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KOLKATA: Even as the government stands to take home a cool Rs 61,162 crore from the spectrum sale that ended on Thursday, analysts warn that winners of the costly airwaves would be saddled with weaker balance sheets, and predict an inevitable hike in telephone call price. Analysts expect the huge spectrum cost burden to hurt future network rollouts and undermine the targets for rural telecom and broadband penetration set by the National Telecom Policy (NTP) 2012.

A much-needed consolidation in the sector may take more time to materialise, as companies won't have enough funds left to pursue acquisitions. Rajan Mathews, director-general of the Cellular Operators Association of India (COAI) - the industry lobby body representing GSM operators like Bharti Airtel, Vodafone India and Idea Cellular - expressed "disappointment at the winning auction pricepoints" . Bharti Airtel, Vodafone, Idea Cellular, Reliance Jio Infocomm, Aircel, Tata Teleservices, Uninor and RCOM were the companies which participated in the auction.

"We are awaiting details of the auction results with the list of winners, which will determine the emerging competitive landscape going ahead. But concerns remain on the impact on NTP 2012 targets, relating to rural penetration , broadband for all, Internet access as it is to be seen if operators will have the financial resources to invest in networks and marketing after bearing high spectrum costs," said Mathews. Mathews said the government should reduce the spectrum usage charge and other levies to help operators "overcome this huge financial burden" . But telecom minister Kapil Sibal was visibly optimistic, claiming that the spectrum sale was a success "due to (its) efficient and reasonable pricing" . "Operators can be stretched in the short term, but surely not in the long term," he said.

"There will be innovative ways of using the bandwidth as it will be a highway for providing public services, for entertainment, for data with respect with education. In 20 years, this sector will again be the golden goose that lays the golden egg." Just a few years ago, the sector was the showpiece of India's expanding economic power. Several global majors including Vodafone and Telenor invested in India, enticed by its growth potential. But the industry soon hit a trough, with a margin-denting price war, cost on debt taken to fund the purchase of 3G bandwidth in 2010 as well as slowing customer additions in urban areas posing challenges .

The rural market still offers scope for growth, but the cost of setting up network there is higher. And, with cash flows expected deplete now because of the cost towards spectrum, operators would likely find it tough to make the investment. "Buyers of this expensive spectrum will not be able to spend much on network rollouts," hurting especially customers "waiting for connectivity or higher bandwidth ," said Mahesh Uppal, director of Com First (India), a consultancy dealing in telecom regulatory affairs. Uppal expects the "bottom lines of Bharti Airtel and Vodafone India to be under severe strain over the next two years" as they need to get 900 MHz airwaves in the metros where their permits will come up for renewal.

"Raising tariffs won't be an easy option since the market is still very competitive and all operators do not have the same high costs of spectrum," he said. romit.guha@timesgroup.com